The Compound Annual Growth Rate (CAGR) formula measures the mean annual growth rate of an investment over a specified time period, assuming profits are reinvested at the end of each period. CAGR provides a 'smoothed' growth rate that eliminates the volatility of year-to-year returns, making it the preferred metric for comparing investment performance, evaluating business revenue growth, and projecting future values. It is the most widely used single-number summary for multi-year financial performance.